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People of the State of California vs. U.S. Bank

Superior Court of California for the County of Los Angeles Central District – Central Civil West Division, Case No. BC 488436

With a $13.4 million fine spread across 132-142 trusts, we estimate the fine per Trust to be approximately $100,000 plus at least another $100,000 per trust for defendant’s legal expenses. Many deals have just one or two properties affected, and with civil penalties at $2,500 per each violation, it seems that most of the fine may be reimbursing California for the cost of this action. As the aggregate settlement amount is supposed to be allocated among the Servicers and Trusts pursuant to the Funding and Settlement Agreement and any court orders (which we haven’t seen), the amount per trust could be less depending upon how much the Servicers pay. However, this settlement sets a precedent for other states or cities to pursue similar actions. Some of these properties were in disrepair prior to foreclosure and some were early payment defaults and likely fraudulent originations. Unfortunately, the trustee is the record owner of a foreclosed property and inherits these problems and the legal liabilities associated with them. The trustees’ deep pockets (and RMBS investors’) makes a nice target for state and local governments to collect fines and penalties for code and ordinance violations and creates a nice payday for all the law firms involved.

Notices were released on December 9th and 10th on Wells Fargo CTSLink and U.S. Bank investor sites notifying investors

  • On November 3, 2016 the Superior Court of the State of California entered an order approving the settlement of the Action as to the Trust-held properties reached by the People and the Trustee.

  • U.S. Bank, solely in its capacity as Trustee for each Trust, without admitting liability or any wrongdoing, entered into a Settlement Agreement and Release with the People and entered into a Funding and Settlement Agreement and a Trustee-Servicer Property Agreement with certain Servicers to resolve all disputes arising out of the Action and Cross-Complaint.

Settlement Agreement

  • An aggregate amount of $13,426,938.11 in monetary relief is to be paid to the People of California.

  • The Trusts collectively will make an initial payment of $1,526,938.11 to the People within 45 days of the Court’s order approving the Settlement Agreement and Release.

  • The Trustee intends to seek approval of the Settlement Documents by a Minnesota state court pursuant to Minnesota Statute section 501C.0202(24).

Source: Excerpts from Complaint – Superior Court of the State of California, County of Los Angeles, Central District #BC488436

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